Another day, another broken promise

June 24, 2014

By Eric Peterson

In line with the “if you like your plan you can keep it,” the promise to “cut the cost of a typical families premium by $2,500” and almost every White House commitment and assurance on Obamacare prior to its enactment (which the Obama administration has since unilaterally amendment more than 30 times) has proven to be patently and demonstratively false.  That trend continued last week with the release of an updated analysis of premiums in 3,137 counties conducted by the Manhattan institute, which found that, on average, premiums for individuals have increased by 49 percent from 2013 to 2014.

Although a 49 percent increase in premiums is certainly enough to put a dent in any American’s paycheck, some will see even steeper hikes – and younger individuals (who consume about 6 times less health care than older individuals) will see the greatest increase.  For example, 27 year old males will see their premiums increase by an eye-popping average of 91 percent while women of the same age will on average see an equally whopping premium hike of 82 percent.

Similarly, impacts by state and county can vary widely. Buchanan County, Missouri will see average increases of over 271 percent for men while Senate Majority Leader Harry Reid’s home-state of Nevada has the dubious distinction of seeing the highest state-wide average premium increase of 179 percent. New Mexico, Arkansas, North Carolina, and Vermont also all saw premiums more than double. If you are curious about how your premiums will be effected, click here.

These increases are not unexpected. They stem from the fact that less-healthy individuals are more likely to require subsidized insurance and are more likely to sign up for it. Also costly, the government mandated insurance policies to cover treatments that policyholders may not want or need such as requiring men to buy policies that provide coverage for mammograms and maternity coverage. This in turn results in cost increases and more expensive policies across the board and those who use less health care expenditure –especially younger individuals– unfairly end up bearing the brunt of these increases.

In order to keep individual plans “affordable,” government subsidizes a portion of the increase in premium prices for those making up to 400 percent of the poverty line. Putting aside the logistical problems of simply determining who is eligible for a subsidy, government subsidies ultimately come from the taxpayers.  Around 87% of the 5.4 million signups through the federal governments exchange are eligible for a taxpayer funded subsidy. In a recent Congressional Budget Office report, the cost is estimated at $12 billion, though the premium increases could certainly put taxpayers on the hook for even more.

These increased costs are a result of removing the price signaling mechanism from health care and cost shifting. Taxpayer funded subsidies artificially lower premium prices for some individuals, leading them to purchase more insurance then they otherwise would, while taxpayers foot the bill. As one analysis in Colorado showed, those receiving subsidies chose more expensive plans that ended up having higher premiums, on average, than plans purchased by those who did not receive subsidies. Similarly having the young and healthy subsidize those with higher healthcare costs leads to an unfair burden placed on that population.

It’s time to admit Obamacare isn’t working. Millions of individuals have had their plans canceled, and millions more are facing increased health care premiums – and that number seems to be growing by the day.  Nearly every promise Americans have been told about Obamacare by its backers has been broken.  Rather than trying to gloss over the laws numerous flaws, it’s time to seek real market-based a patient driven health care solutions.

Like this post? Chip in $5 to AFP